In This Article

David Braeger believes the Internet and crowdfunding will change the investing world, including his fledgling company.

Braeger Auto Finance Group LLC, Glendale, has been lending money to auto finance companies since January, working with 22 investors and seeking more. But new federal rules allow the company to solicit funds from accredited investors over the Internet, giving it access to many more potential investors.

David Braeger’s grandfather started Braeger Automotive Group in Milwaukee. Braeger Auto Finance is unrelated to the Braeger dealerships, but it does deal with the intricacies of the car business.

The firm lends money to auto finance companies affiliated with car dealerships that sell to buyers with bad credit. These buyers typically can’t get bank loans to buy cars, so the dealership lends them money through its auto finance company, often at higher interest rates and fees than you would find at a bank or credit union.

The money from Braeger is attractive to the dealerships because they can leverage it to get bank loans, said David Braeger, chief executive officer. So far, Braeger clients have invested $4.1 million that is supporting $44 million in loans.

Braeger Auto Finance is unique because it offers smaller loans to the auto finance companies, said Bill Kellagher, president of Nationwide Specialty Finance Inc. and a board member of Braeger Auto Finance.

Most finance groups that lend to auto finance firms make loans of tens of millions of dollars, but Braeger loaned Nationwide Specialty Finance, Houston, nearly $3.8 million. Kellagher’s company was able to take that loan and leverage it for a bank loan, bringing its interest rate down from 14 percent with its previous lender to 6.25 percent with the bank, Kellagher said.

Braeger plans to take its operations to the next level with the launch of VroomBank, an Internet portal to solicit investments. The company can solicit investments from accredited investors, those with net income of more than $200,000 or net worth of more than $1 million, without registering with the U.S. Securities & Exchange Commission under a part of the federal JOBS Act.

The act eventually would allow companies to solicit unaccredited investors, commonly known as crowdfunding, but the rules for that step have yet to be written.

Braeger expects to launch the website this month. It believes it can grow to $200 million invested within three years, David Braeger said.

Few companies have taken advantage of the new rules concerning general solicitations so far, said Jim Peterson, a partner in the private equity and venture capital group with Milwaukee law firm Foley & Lardner LLP. The rules have some drawbacks that might deter new companies, including a requirement that companies verify the accredited status of investors, he said.